Tag Archives: law

Gambling deterrence mechanism

Compulsive gambling is driven by the hope of winning a large amount, so one way to deter gambling addiction is to forbid paying out winnings to people registered as having this problem. In a one-shot interaction, casinos and lottery organisers clearly have an incentive to keep both the stakes and the winnings, but problem gambling is repeated. Sufficiently patient casinos are motivated to establish a reputation for paying out winnings, if the punishment is small or unlikely enough, because such reputation attracts other gamblers, which increases the long-run expected profit of the casino. The gamblers are not interested in reporting the casino for illegally paying out, because they benefit from the payout, and the closure of the establishment would prevent them from satisfying their craving.

However, the gamblers’ desire for big winnings, even with very low probability, can be used to motivate them to report – the law can offer a large sum to anyone who proves that a casino made an illegal payout. The reward can be financed from an even larger fine levied on the law-breaking casino. The reward should of course be in addition to any winnings of the whistleblower if the latter is a patron of the casino, because a gambler should not lose money by reporting. Gamblers are impatient, unlike casinos, so the repeated interaction with an establishment does not outweigh an immediate payout, even if collecting the payout leads to less opportunity to gamble in the future.

Privacy reduces cooperation, may be countered by free speech

Cooperation relies on reputation. For example, fraud in online markets is deterred by the threat of bad reviews, which reduce future trading with the defector. Data protection, specifically the “right to be forgotten” allows those with a bad reputation to erase their records from the market provider’s database and create new accounts with a clean slate. Bayesian participants of the market then rationally attach a bad reputation to any new account (“guilty until proven innocent”). If new entrants are penalised, then entry and competition decrease.

One way to counter this abusing of data protection laws to escape the consequences of one’s past misdeeds is to use free speech laws. Allow market participants to comment on or rate others, protecting such comments as a civil liberty. If other traders can identify a bad actor, for example using his or her government-issued ID, then any future account by the same individual can be penalised by attaching the previous bad comments from the start.

Of course, comments could be abused to destroy competitors’ reputations, so leaving a bad comment should have a cost. For example, the comments are numerical ratings and the average rating given by a person is subtracted from all ratings given by that person. Dividing by the standard deviation is helpful for making the ratings of those with extreme opinions comparable to the scores given by moderates. Normalising by the mean and standard deviation makes ratings relative, so pulling down someone’s reputation pushes up those of others.

However, if a single entity can control multiple accounts (create fake profiles or use company accounts), then he or she can exchange positive ratings between his or her own profiles and rate others badly. Without being able to distinguish new accounts from fake profiles, any rating system has to either penalise entrants or allow sock-puppet accounts to operate unchecked. Again, official ID requirements may deter multiple account creation, but privacy laws impede this deterrence. There is always the following trilemma: either some form of un-erasable web activity history is kept, or entrants are punished, or fake accounts go unpunished.

App for police reports

Australia would benefit from an app or website for reporting parking and traffic violations (Singapore has such a website) and rating drivers. It would make police work easier, and the greater probability of getting caught would deter illegal parking and dangerous driving. To prevent frivolous reports from overloading the system, people should make the report under their own name, which requires proving their identity to get an account on the app. Proving identity online is easy in countries with a national ID system like Estonia, but may require more red tape in Australia.
The app should allow uploading proof of the violation, for example a photo of an illegally parked vehicle or a dashcam video of someone’s dangerous driving. There should also be an option of uploading a signed statutory declaration describing the crime. In summary, the app should make it as easy as possible to prosecute a violator, so it should follow legal procedure and standards of evidence as much as possible.
The current system of calling the police non-emergency number to report small infringements is slow and cumbersome. For example if the answerer of the call does not understand the address, or the problem does not have a clear address (e.g. a car parked in the middle of a nature park), then it takes time and frustration to explain the place at which the law is being broken. An app could easily solve the address issue by allowing automatic location tracking. The current system of reporting by phone also has no way for a caller to provide evidence that someone is breaking the law.
Privacy laws in Australia are sometimes unreasonably strict. Even emergency services cannot see the location of the mobile phone from which they receive a call (https://www.acma.gov.au/theACMA/emergency-call-service-faq-i-acma) Such draconian privacy laws may prevent the uploading of proofs of violations, e.g. photos of illegally parked vehicles. Statutory declarations testifying to someone’s lawbreaking probably do not infringe on the lawbreaker’s privacy, so do not bring legal trouble to the person reporting the violation. Uploading declarations could be used as a first step to make the app useful for prosecution.
The app could also allow positive feedback, i.e. praising polite drivers. If this feedback is verifiable, because the users of the app have proved their identity, then a person applying for a driving job (bus, taxi, lorry) could use a good rating on the app to prove being a safe driver. This would be a selling point in the job interview.
Philosophically, policing anything means that the community agrees to impose punishments for certain behaviours. This sanctioning may be delegated to specialised workers like police officers, judges, prison wardens. The app for reporting violations could be used for distributed policing instead, meaning that anyone in the community can use the app to check the past feedback on others who they interact with. Then the community members can respond in the interaction according to the feedback they see, for example avoid trusting someone with who has been repeatedly reported for lawbreaking. Such a verifiable feedback system then rewards good past behaviour and punishes the breaking of social norms.

“Relative to opportunity” evaluation and anti-discrimination laws

Most countries have some anti-discrimination laws, requiring employers to pay people with different productivities equally, or to give someone who took parental leave their job back after they return. One reason why unequally productive people are paid equally is evaluation “relative to opportunity”, i.e. the bar for a promotion or a raise is lower for someone from a historically disadvantaged group or who has family responsibilities. Suppose that there is a consensus in society for supporting certain groups. Why might the cost of this support be placed only on specific employers, namely those who employ the target group? Why doesn’t the support take the form of direct subsidies from the government to the target group, financed by taxing all employers equally?
An explanation from political economy is as follows. Clever people in society or government want to pay a larger subsidy to high-income members of the target group, perhaps because the clever people are themselves high-income and belong to the target group. However, the majority of voters would not like high-income people getting a bigger subsidy. So the clever people disguise the subsidy as something that looks equal, namely every member of the target group gets the same duration of parental leave, the same guarantee of their job back at the end of leave, the same privileges and special treatment for promotions and raises. The value of these guarantees and privileges is greater for higher-paying jobs. For example, a promotion from a high-paying job usually gives a bigger salary increase than from a low-paying job. A guarantee of getting a high-paying job back after parental leave is worth more than a guaranteed low-paid job. Thus the support provided to the high-income members of the target group is more valuable.
Further, productivity at a high-income job is typically more responsive to the employee’s human capital, and the skills deteriorate faster. A truck driver who has not driven for some years retains a greater fraction of driving ability than a surgeon retains from surgical technique after not operating for the same number of years. The productivity difference between an employee returning from parental leave and someone continuously employed is on average greater for higher-paying jobs. So the cost to an employer of keeping a job for a returning employee instead of hiring a new person is greater if the job is higher-paid. The subsidy to the high-income members of the target group thus costs more per person.
Income is positively correlated with intelligence, so the smart members of the target group are likely the wealthy members who benefit from this kind of unequal subsidy. They are likely to vote and campaign in favour of the unequal support, instead of an equal cash subsidy for everyone. The less smart members of the target group who lose from an unequal subsidy (compared to an equal one) are less likely to understand that they lose. This makes them abstain from opposing the unequal subsidy.
In effect, the smart members of the target group redistribute a baseline-equal subsidy from the less smart (and less wealthy) to themselves, at the social cost of losing some efficiency in the economy. Keeping a job for someone when a more productive potential hire is available means losing the difference in the productivities of the two people. Such efficiency losses are typical of re-distributive policies that are not cash transfers.
In principle, the cost of the current policies could still be equally distributed between employers by taxing them all and subsidising those who employ the target group. Or equivalently, taxing only those who don’t employ the target group. However, to equalise the cost to employers, the firms employing highly-paid members of the target group must be compensated more than the ones employing low-paid members. The differential compensation to firms would call attention to the unequal support that people with different incomes are receiving, thus weakening the disguise of the subsidy. The clever people want to avoid that, so do not campaign for equalising the costs of anti-discrimination laws across employers.

Would a protest influence you?

Help, a politician I don’t like is in power! I should do something about it. But what? I know! I will join a protest – this is something. Now I can feel good about myself for having done something. And post on social media how I opposed evil so effectively. I am a socially conscious, altrustic person.

On a more serious note, one way to evaluate whether a given protest could change the situation is to put yourself in the position of the target audience. If your favourite politician was in power, would this protest change your support for said politician? If you were the politician in power, would you change your policy when many opponents use this protest against it?

Even if the answer is no, a protest may still have some effect, because it may change the preferences of the swing voters. The „no” may come from deeply ideological people, whereas more open-minded folks may conform to the herd. If they see many people opposed to something, they may start to oppose it too.

On the other hand, a protest may have the opposite effect to the one intended. It may harden ideological positions and increase polarisation. If the majority is weakly in favour of a policy, then protests against it may strengthen the support of the majority for it, leading to greater turnout and more yes-votes.

From an economic viewpoint, marching on the street with signs, chanting slogans or commenting on social media has no direct impact on politicians or most voters. The exception is those who are stuck in a traffic jam when a protest closes a street. Rational agents should not pay attention to protests which do not affect them (such activism is „cheap talk” in economic jargon, or at best „money burning”).

Real people may be swayed by the opinion of a large crowd. However, a form of protest that has an objective impact on people’s lives is likely to influence people more, because it affects them via both the opinion of the crowd and the direct impact. Both the belief shift and the hardening of the opposition are probably greater.

There are many illegal means of directly affecting the population, but also some legal forms of protest with objective impact. Economic protest is boycotting certain countries, firms or goods, refusing to work for the regime, and moving elsewhere („voting with one’s feet”), and is usually legal. The objective impact is that if enough intelligent and hardworking people shift their spending and taxpaying elsewhere, then the regime will be in fiscal trouble. If this does not change the policy of the leadership, then at least the lack of money will make the program harder to carry out.

There is a larger personal cost for economic protest than for cheap talk. One has to give up certain goods, or pay more, or experience the hassle of moving residence. This is why most people who threaten to boycott a firm or leave a country do not end up doing so. The threats are just another form of cheap talk, which can be posted on social media to impress other cheap talkers.

Organ trade restrictions

Trade in human body parts is mostly forbidden, although donations without compensation or for “coverage of reasonable costs” are allowed. One reason is that trade creates the incentive for criminals to harvest organs against people’s will. In the worst case, a young and healthy person is killed to get all their marketable body parts. Another problem is that stupid people may sell their organs voluntarily and later regret it.

The dangers differ depending on how damaging the removal of the organ is. Trade in hearts encourages killing more than trade in donor blood, although even for blood a victim can be drained completely if the price is high enough. For criminals, the complexity of organ removal and how fast it needs to be delivered to the recipient also matter. It would make sense for the restrictions and punishments to correspond to the danger of organ robbery and the associated damage.

The one tissue type currently transferred between people for which organ robbery and overdonation seem nonissues is sperm. Forcing someone to donate against their will is possible, but causes no permanent damage (in my medically ignorant opinion). Too frequent donations lower the quality (number of cells per unit of volume) in a detectable way, which would make most robbed sperm unmarketable. Yet payment for donor sperm is still forbidden in Australia (Human Tissue Act 1982) and many other countries. This may be a knee-jerk extension of the laws against trade in human organs, or there may be some reason I have missed.

Of bicycle bells

In Australia, it is compulsory to have a bell or horn on a bike to warn other road users. This seems strange, because when cycling, hands are in use, but the mouth is not. So it would make sense to use the mouth to produce sounds, leaving the hands for steering. Perhaps a better law would require cyclists to be able to produce the bell or horn sound, giving them the choice of whether to use their mouth or a device for this.